Income Share Agreements: How Do They Work?
Are you trying to figure out how to pay for a coding bootcamp or university without breaking the bank? As an alternative to student loans, many schools are now offering income share agreements (ISAs). Like loans, ISAs allow students to pay for their education over time in small installments, but they do so in a more creative fashion. Read on to learn more.
What Are Income Share Agreements?
Income share agreements are contract-based loans. A loan provider will help you pay for your education, but you must pay this provider a set percentage of your post-graduate income until you have repaid your tuition in full.
This type of financing option has been in use for over fifty years. The method has grown in popularity, but it is still uncommon. Some educational institutions may provide an ISA option for students, while others do not. It is still possible to utilize an ISA if it is not provided by your school by finding an external ISA provider.
Income Share Agreement Pros and Cons
On the plus side, income share agreements allow you to pay for your education without a cosigner. They are better than other types of loans in that they are not based on credit or FICO scores. This means that if you do not have a good credit score, you can still get one. Additionally, the payment amounts tend to be manageable, even on a low income.
Another benefit of ISAs is that, even though they take a percentage of your future income, they have a defined repayment term. You may be able to complete the payments before the term is up, but if you have not repaid your tuition by the end of the term, there is no penalty.
With all these benefits, ISAs have some drawbacks when compared to other financial aid options. If your post-graduate salary is higher than expected, your repayment might be larger than the initial loan. And if you land a job that pays less than you hoped for, you may struggle to make a living and meet your payment obligations at the same time.
Income Share Agreements vs Student Loans
Income share agreements are often confused with student loans. There are a few key differences between the two. ISAs are not regulated, while student loans are. This regulation means ISAs can end up being more costly than loans. ISAs are almost always provided by private companies, whereas there are federal student loans as well as private student loans.
ISAs do, however, offer various borrowing limits and repayment options. A private student loan won’t always provide these options, making it difficult to repay when your income is low. What’s more consumer advocates argue that both private loans and ISAs prey on low-income students. They tend to favor federal loans over other college financing options.
Schools That Offer Income Share Agreements
Based in Portland, Alchemy Code Lab is one of the best coding bootcamps around. This school offers full-time programs in software development. The program’s total cost is $24,000. It is a 21-week course that allows students to build a GitHub portfolio. Alchemy Code Lab also prepares students for life after graduation through their career services.
Clarkson University in New York offers highly competitive ISAs. They are offered to only 20 students per year. Each student that signs these agreements receives $10,000 per school year. Clarkson University boasts a job placement rate of 97 percent.
Fullstack Academy is a coding bootcamp based in New York. It offers full-time and part-time programs on a variety of tech subjects. These subjects include web development, cyber security, and coding. Part-time programs cost $14,980 and full-time programs cost $17,910. You can choose to pay these costs upfront, with private loans, or through an ISA.
Ironhack’s bootcamp provides courses in web development, UX/UI design, data analytics, and cybersecurity. It has campuses in Europe and other places around the globe, as well as online courses. Ironhack offers full-time and part-time courses. The cost of these courses ranges from $12,500 to $13,000, though the cost may also depend on the location.
Lackawanna College is based in Pennsylvania. Its ISAs will only cover tuition costs that remain after you have exhausted your student loan options. These agreements are available to students pursuing specific majors who earn a GPA of at least 2.5.
Lambda School’s programs range from six to twelve months. It provides programs in data science, full-stack web development, user experience design, and more. With Lambda School’s ISA, you won’t owe anything until you earn $50,000 a year, and you’ll never owe a cent above $30,000 or have to make more than 60 monthly payments.
Northeastern University is a private university located in Boston. It provides undergraduate and graduate programs. Northeastern University’s ISAs are offered per term and you will get your money before the bill for your tuition comes due. The agreement dates may vary depending on whom you file your ISA with.
Purdue University offers ISAs as additional support on top of traditional loans. These agreements are offered to sophomores, juniors, and seniors. These are provided by the university and the Purdue Research Foundation to help alleviate the burden of paying for a college degree program.
University of Utah
ISAs are fairly new at the University of Utah. It is limited to undergraduates who are projected to receive their diplomas within one year. Students may be eligible to receive anywhere from $6,000 to $20,000 per year. This total accounts for financial aid and scholarships as well.
Wyncode offers bootcamps in digital marketing, UX/UI design, and full stack and front end web development. The full-time courses are ten weeks long, while the part-time courses are 12 weeks. Students in the UX/UI and full stack courses have access to the ISA. Wyncode’s ISA obligates students to pay back tuition once they are earning at least $40,000.
Is an Income Share Agreement Worth It?
Yes, an income share agreement is a good option for you if you’re looking for a way to pay for school on the basis of your anticipated future earnings. You will also probably end up making smaller installments than you would with a more traditional student loan.
That being said, depending on the contract terms, an ISA may not be for you. Your post-graduate salary will have a huge impact on how much you owe and how long it takes to pay it off. The length of the ISA impacts the cost as well. If you are unable to settle your debt quickly, you may end up paying significantly more than you originally borrowed.
Income Share Agreement FAQ
What happens if I don’t pay my income share agreement?
Most income share agreements require you to make monthly payments. If your earnings fall below the threshold specified in your contract, you will not be expected to pay until your monthly income increases above the threshold again.
If you hit the minimum income threshold and your ISA goes into effect, you should do your best to make the required payments. Failure to do so may subject you to fines, and you will likely have trouble borrowing money in the future.
Can you get out of an income share agreement?
There are three main ways to get out of your income share agreement. You can make the required number of payments, pay the max payment cap specified by the provider, or come to the end of the payment window. You are also not required to make payments if you lose your job.
Where can I find an income share agreement provider?
Most colleges provide their own income share agreements for students. However, if the school you attend does not provide an ISA, you can find alternative providers through a quick online search. You can sign an ISA through providers like Blair, Lumni, and Align.
Are income share agreements tax-deductible?
Since income share agreements don’t charge interest, you’re not given any tax breaks or deductions for paying them.